CME ready for green derivatives push

CME Group, the world's largest derivatives exchange, is gearing up for a U.S. cap-and-trade carbon policy that could mean a boom in green futures and options trade, a top CME official said on Monday.

We're positioned to take advantage of that should the energy policy and energy legislation go in the way of a tradable emissions and credit market, CME Chief Executive Craig Donohue told the Reuters Exchanges and Trading Summit in New York in a telephone interview.

Expanded trading of green products is likely if the United States adopts a cap-and-trade policy that would limit the amount of greenhouse gases like carbon dioxide that industries can emit. Man-made greenhouse gases are cited by most scientists and the Obama administration as a key reason behind rising global warming trends and effects.

A current cap-and-trade proposal in Congress, introduced by U.S. Representatives Henry Waxman and Edward Markey, would cap carbon emissions and require industry to offset every ton of carbon dioxide emissions with tradable carbon credits.

Energy-intensive industries that overshoot their allowed emissions would be forced to buy allowances from those meeting their targets, building in a market incentive to go green.

The CME inherited a green trading initiative from its merger with the New York Mercantile Exchange, which launched greenhouse gases futures and options in March, 2008.

Since the beginning -- we have already traded more than 30,000 contracts in the green and carbon and emissions area, Donohue said.

CME wants to provide the offerings on a separate futures exchange, The Green Exchange, hoping for approval from its regulator, the Commodity Futures Trading Commission, in 2009.

That green venture will go head to head with the first-ever green exchange, the Chicago Climate Exchange (CCX) formed in 2003 by Chicago derivatives market expert Richard Sandor.

CCX already trades emission credits on six greenhouse gases under voluntary but legally binding trades. It has dozens of members including corporations, utilities and municipalities with affiliate exchanges in the European Union, Canada and China.

The CFTC said on Monday it will hold its first advisory committee meeting this week to focus on carbon dioxide and other emissions trading markets.

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